Federal legislation is broadening definitions and easing off taxes

Instead of reaching for a glass of champagne this New Year, grab a hard cider and toast to Oregon’s booming hard cider industry. Recent changes in federal legislation, co-sponsored by Rep. Earl Blumenauer and Sen. Ron Wyden, have smoothed the process for craft cider makers by broadening definitions of hard cider and easing off taxes.

These changes are especially relevant to Oregon, says Lee Larsen, CEO of 2 Towns Ciderhouse in Corvallis, because Oregon has around 6 percent of the market share for hard cider, while the national average is 1 percent.

“Just like with the craft beer industry in Oregon and the Northwest, Oregon is leading the resurgence of craft cider,” Larsen says. “It’s an extreme hot spot, and it’s currently one of the most competitive cider markets in the nation.”

The CIDER (Cider Investment and Development through Excise Tax Reduction) Act, which passed the House, allows ciders to have carbonation levels that resemble the levels in craft beer, matching consumer expectations. While the CIDER Act had been introduced separately, it passed the House and Senate as part of the omnibus Protecting Americans from Tax Hikes (PATH) Act authorizing government funding.

Previously, Larsen says, “the carbonation allowed in cider was pretty minimal. We have had people tell us all the time that our cider is under-carbonated.”

For higher levels of carbonation, Larsen says, cider makers were previously taxed $3.30 per gallon, versus $0.22 a gallon for lower levels of carbonation. Under the new rules, hard cider can contain 6.4 grams of carbonation per liter of liquid, a level closer to the carbonation found in craft beer.

Sean Kelly, owner of WildCraft Cider Works in Eugene, says the new legislation allows more wiggle room for ciders that re-ferment in the bottle. “There was always a concern that if the cider re-fermented a little bit in the bottle, you could be tested and called out for that,” he says.

The CIDER Act brings pear ciders into the definition of hard ciders and also allows some flexibility in the level of alcohol present in hard ciders. The legislation amends the section of the Internal Revenue Code that defines hard cider.

“With different apple cultivars, the amount of sugar content in the apple can vary dramatically,” Larsen says. The old rules called for hard cider to contain 7 percent alcohol by volume (ABV) or less — this level was taxed at $0.22 per gallon — and anything above that was taxed at $1.07 per gallon, a cost-prohibitive jump for cider producers.

The new mark of a little below 8.5 percent ABV, Larsen says, “allows cider producers and apple growers to continue to push the bounds and increase the diversity of products available on the shelf.”

For 2 Towns, Larsen says, this means the ciderhouse can expand its range. “The biggest thing is being able to have almost all of our ciders on the shelf and have carbonation levels that consumers are expecting in our products,” he says.

Kelly says it’s another step in craft cider mirroring the craft beer movement, and he says he’s interested to see what happens next.